Pakistan

IMF, PAK FAIL TO SEE EYE TO EYE IN ASSESSMENT OF ECONOMY

Pakistan and International Monetary Fund (IMF) remained poles apart in their assessment of the country’s economy, as Islamabad took an optimistic view of the external and fiscal sector while the global lender cautioned about emerging challenges that are posing risks to the favourable outlook. The IMF once again sought significant devaluation of the Pakistani rupee against the US dollar to curb external sector challenges, as it said that foreign exchange reserves have already fallen “below a comfortable level”. The IMF released on Thursday the Article-IV consultation report on the state of the economy that showed that there was a disagreement between it and Pakistani authorities over a number of issues. They had divergent views on the external sector vulnerabilities, slowing fiscal consolidation and structural reforms. The IMF staff stressed that reversing the recent decline in foreign exchange reserves and allowing for greater exchange rate flexibility are needed to rebuild external buffers, which are below adequate levels. It said that Pakistan’s real effective exchange rate is overvalued in the range of 10 to 20 percent, seeking “greater exchange rate flexibility, fiscal adjustment, and structural reforms” to correct the imbalance. The fund advocated that greater exchange rate flexibility would strengthen Pakistan’s competitiveness, which has been affected by real effective exchange appreciation. However, the IMF said that Pakistani authorities’ own assessment suggested significantly lower currency overvaluation. In addition, Pakistan viewed reserves as adequate as they cover more than three months of imports. After an end of the $6.2 billion IMF programme in September last year, Pakistan’s external account has deteriorated at a rapid pace, exposing the hollowness of reforms under the three-year programme. The current account deficit has already widened to $10.6 billion, which is more than double the assessment of the IMF and Pakistan for the fiscal year ended on June 30. The IMF said that the structure of financial account of Pakistan showed reliance on debt issuance rather than on Foreign Direct Investment flows, which have been on a declining trend over the last decade. “The pace of fiscal consolidation has slowed, public debt remains high, and mobilisation of tax revenue needs to be further strengthened,” it added. The IMF said that external vulnerabilities have increased with a widening current account deficit and rising medium-term external repayment obligations linked to the China-Pakistan Economic Corridor (CPEC) and other large investment projects. Foreign exchange reserves have declined to $16.1 billion since the end of the EFF-supported programme and “remain below comfortable levels”. The $16.1 billion reserves are sufficient to finance only 3.4 months of imports. These reserves are inclusive of $3.6 billion that the SBP obtained through derivative position. The IMF said that $3.6 billion forward position could put additional pressure on reserves.

PAKISTAN CAN TREBLE PER CAPITA INCOME BY FALLING FERTILITY

Harnessing the potential of a large, young and highly skilled population can bring about an economic turnaround – the likes of which many Asian countries have already experienced. But high fertility and growing dependency can prevent Pakistan from moving out of a vicious cycle of poverty and deprivation. This was said by Population Council Country Director Dr Zeba Sathar while addressing a satellite event of the London Summit in Islamabad on Wednesday which had been jointly organised by the Council, the Health Ministry, United Nation Population Fund and the British High Commission. Dr Sathar said that while the population growth rate in the country was slowing down, fertility levels remain high when compared to the rest of the region. With up to 5 million unwanted pregnancies and an estimated 2 million abortions taking place annually, Pakistan faces a challenge in providing family planning services to all those women and men with unmet needs, she said. The council’s director said that Pakistan was set to make strong commitments at the global summit in London because of its intentions to speed up its transition to lower levels of fertility. It clearly needs to accelerate its effort to reduce unwanted fertility for reducing maternal and child mortality and for improving human development and economic outcomes, she said. If Pakistan is able to adequately regulate the fertility rate, Dr Sathar said that Pakistan would be able to treble its per capita income in 2050 through a rapid decline in fertility. Health Minister Saira Afzal Tarar, meanwhile, vowed to accelerate efforts towards achieving goals in population planning and access to reproductive health services.

ENVIRONMENTALISTS TELL CLIMATE CHANGE THREAT TO FOOD SECURITY

Environmentalists said climate change due to global warming can affect agricultural output, thereby threatening the country’s food security situation. There is a dire need to adopt measures on war-footings to create awareness among the farming community about the impacts of climate change, Deputy Director Ministry of Climate Change (MoCC) Muhammad Saleem Shaikh said. He informed that the ministry had directed provinces to take steps to cope with impacts of climate change particularly the agriculture and livestock sectors. He added that agriculture was the backbone of Pakistan’s economy and makes up 21 percent of the country’s GDP along with employing 45 percent of the labour force. Sustainable Development Policy Institute (SDPI) environmental expert Kashif Salik said various studies showed that steadily rising temperatures were posing a serious risk to country’s efforts for achieving sustainable food security and meet food consumption needs. Growth in agricultural output is linked to temperature and rise in temperature adversely affects crops and fodder, he said, adding that immediate action is needed to cope with the situation. Former senior director of World Wide Fund for Conservation of Nature (WWF) Dr Ijaz said that climate suitability of crops needs to be considered before planning cultivation to obtain optimum yields. The farming community was persuaded [during my tenure] to use modern methods of cultivation in the areas which were prone to climate change, he stated, adding that increased application of biotechnology innovations can allow farming of carbon absorbing crops and seeds. Prominent environmentalist Mehmood Khalid Qamar said that deforestation was causing climate hazards. He highlighted massive deforestation as the main cause of the global climate change and urged the government to initiate reforestation efforts like the K-P’s ‘billion trees tsunami’ campaign.

CPEC TO CREATE OPPORTUNITIES, NEW AVENUES

The China-Pakistan Economic Corridor (CPEC) projects will open new avenues and opportunities for the people of this country, said Planning and Development Member Governance Tariq Hijazi. While talking on Thursday, he said that foreign direct investment of $46 billion was coming to Pakistan through CPEC, which will provide access to other countries besides China. A comprehensive strategy adopted by the present government will bring development, create opportunities and improve the life of the common man, said Hijazi. Due to the peaceful environment and better law and order situation, Japan, EU and the Asian Development Bank were ready to provide funding for Bhasha dam, he added. China wants to see continuity in policies, stable government and better security for the people coming to invest in Pakistan under CPEC.

BOI TO ORGANIZE PSEZ CELLS

Prioritised Special Economic Zones (PSEZs) will provide immense opportunities to foreign investors and increase Foreign Direct Investment (FDI) in the country. Pakistan has immense potential for ensuring connectivity to international investors with regional and international market for industrial growth, Board of Investment (BoI) Secretary Azhar Ali Chaudhry told APP Thursday, at the side-lines of a session on PSEZs with a delegation of Chinese investors. He said that nine prioritised industrial zones have been proposed for high-tech industry to enhance the export and employment opportunities for the people in the country. Chaudhry said that PSEZs Cell had been furnished on a contemporary corporate style and would be equipped with state-of-the-art facilities.

TELECOM AUTHORITY REITERATES TELECOM SECTOR’S CONTRIBUTION

The telecom sector has contributed Rs582.95 billion to the national exchequer during the last three and a half years, making it one of the most significant sources of revenue for the federal government. The largest chunk of Rs243.28 billion came during fiscal year 2013-14. Moreover, Rs126.26 billion were contributed during 2014-15, Rs159.65 million during 2015-16 and Rs53.76 billion during the first two quarters of FY 2016-17. Officials at Pakistan Telecommunication Authority (PTA) on Thursday said the contributions comprised all of PTA’s receipts including initial and annual licence fees, annual radio frequency spectrum, spectrum administrative fee, universal service fund (USF) and research & development fund contributions, APC for USF, numbering charges and licence application fee. Other income streams for the government included conventional taxes including customs duties, withholding tax (WHT) and other charges.

TELECOM AUTHORITY BLOCKED 12,968 WEBSITES TILL APRIL

Moreover, information technology remittances have also seen a major increase over the last decade with a compound annual growth rate (CAGR) of approximately 23 percent and a total increase of almost 97 percent. The country’s IT exports have also topped $2.8 billion, as a result of the telecom sector’s expansion into internet related services, according to most estimates. The annual domestic income of IT firms has also increased to $500 million with total income estimated to be $3.3 billion.

SSGC ASKED TO CONSTRUCT LNG PIPELINE FROM KARACHI TO NAWABSHAH

A state run utility company has been assigned the task of completing the Karachi-Nawabshah portion of the North-South liquefied natural gas (LNG) pipeline project as RT Global Resources, the original Russian company tasked with the project, is facing US sanctions. Sources said that Pakistani and Russian companies had finished working on gas pricing modalities but sanctions on RT Global were delaying formal initiation. To avoid delay in implementing LNG pipeline project, the government has tasked Sui Southern Gas Company (SSGC) with completing the southern portion of the North-South pipeline project from Karachi to Nawabshah, they said, adding that RT Global will complete the rest of the project from Nawabshah to Lahore once sanctions are removed. The two governments signed a government-to-government deal in October 2015 to construct the North-South LNG pipeline which will connect LNG terminals in Karachi and Lahore. The move was aimed at addressing Punjab’s energy woes. The project is to follow a build-operate-transfer (BOT) model with majority of the financing coming from Russia and a Russian-nominated company is supposed to build and operate the pipeline for twenty-five years. After this period, the pipeline will be handed over to Pakistan. Several conditions are attached to the deal related to minimum LNG imports from Russia and tolling fees. Russia had asked for a tolling fee of $1.2 per million British thermal units (mmbtu) for gas supply which was brought down to 85 cents per mmbtu, after haggling by the Economic Coordination Committee (ECC). Now, Pakistan has asked Russia for further reductions in price with a commercial agreement expected to be signed soon, followed by a formal groundbreaking of the project. Pakistan is striving to forge closer ties with Russia in face of weakened relations with the United States coupled with the cozying up of Indian and US governments. Earlier, Russian energy giant Gazprom inked a deal with Oil and Gas Development Company (OGDC), Pakistan’s largest hydrocarbon explorer, to carry out oil and gas explorations through joint ventures.

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